Hungary quietly takes out largest loan from Chinese banks

With public debt at record highs, Budapest is increasingly turning to Beijing for money.

Hungary borrowed 1 billion euros – the largest loan ever taken by Budapest – from three Chinese banks this spring, data from the state debt agency’s website shows.

The loan, provided by the China Development Bank, the Export-Import Bank of China and the Hungarian branch of the Bank of China, was fully drawn down on April 19 and must be repaid within three years, Politico writes .

Budapest itself has not announced the agreement. It was first reported on Thursday by Hungarian business publication Portfolio and later confirmed by a state agency.

The significant loan comes as Budapest deepens its ties with Beijing. According to Hungarian Foreign Minister Peter Szijjarto, Chinese companies such as electric carmaker BYD and tech giant Huawei have invested a total of around 16 billion euros in the country so far.

“The loan agreement allows for the financing of investments in infrastructure and the energy sector, among other things. The deal keeps the government’s debt-to-GDP ratio within the ceiling of 28.9 percent,” state news agency Portfolio reported on Thursday morning after the publication first reported on the deal.

The new Chinese loan is the largest in government debt, the second largest being the $917 million (€877 million on the day of receipt) loan from China Eximbank for the Budapest-Belgrade railway project.

While Portfolio noted that the interest rate is variable, the government did not disclose any further details about the interest rate, repayment schedule or other details.

Cooperation between Hungary and China

In May, Szijjarto also announced a raft of joint infrastructure projects with China, including a high-speed rail line to Budapest airport, a freight rail line around the Hungarian capital, oil pipelines between Hungary and Serbia, and nuclear cooperation.

“We have achieved a high degree of political mutual trust. Our bilateral relations are at their highest level in history and have embarked on a golden journey,” Chinese President Xi Jinping said in a statement ahead of his visit to Budapest in May. Orban visited the Chinese capital a few weeks later, just after taking over as EU Council President .

With Hungary’s public debt at a record high of 140 billion euros (73.5 percent of GDP) and a budget deficit of 6.7 percent of GDP, Budapest is in desperate need of cash. Budapest is still waiting for billions of euros in EU funds.

(C)UNIAN 2024